A 87 years old just sold her house and received $1M on the proceed. She wants to put her money to grow more for legacy. She is too old for life insurance and is not interested in one. Her house proceeds is around the same as the cost basis when her husband passed away. She was proposed by her broker for a Fixed Indexed Annuity for 7 years. Broker claimed it will provide her 5% guaranteed return. However, in the brochure, it’s stated that the floor (guarantee) is 0%. Within this 7 years, she can only has 5% (max 7% depending on situations) free withdrawal. If she dies during the first 13th years, she only get what she puts in, which is $1M. If she canceled the annuity, she will own surrender fees and will not receive her $1M back. She has high net worth and 4 grown children. Her estate could be huge as well. She comes to you for advice.
(1) What vehicle you will recommend her to put that $1M? Why?
(2) Will you propose a 7 years annuity like the other broker?And Why/Why NOT?
Hey @A11, I’m not sure what the best option is without more info, but here’s my thought process.
Main facts:
Primary objective: “grow more for legacy”
Age: 87
High net worth
Has 4 grown children
The proposed annuity has a large penalty spanning 13 years, requiring her to live to be 100 to avoid it, so that doesn’t seem like the best choice.
Since she’s financially stable and her main goal is to increase her assets and leave money for her grown kids in anywhere from say 0 - 20 years, it feels like a generally diversified portfolio of common stock, preferred stock, bonds, etc. might make the most sense.
The passage doesn’t say anything about how she would distribute the assets, but again since she’s nearing the end of her life, maybe it would be best to set up an irrevocable trust to make it easier to avoid probate and minimize estate taxes.
I feel like more information would be needed to make the most suitable recommendation.